Stipend Definition: What It Is & Who Receives It

A stipend is a set sum of money that is paid to an individual to help defray expenses. Common recipients of stipends include students, interns, researchers, and clergy. Stipends are distinct from salaries or wages, as they are not directly tied to work performed and are customarily given to someone performing a function that is usually unpaid.

Summary

• Stipends are a set amount of money given to an individual to help defray living expenses, such as room and board or other expenses related to the specific purpose for which the stipend is given.
• Stipends do not typically include taxes withheld but must be reported by the individual receiving a stipend as part of their taxable income.
• Stipends are offered for a wide variety of purposes – the majority are offered to support some type of continuing education.

Characteristics of Stipends

The most common types of stipends are those given to help someone with the costs of room and board or travel. Graduate schools sometimes offer students general stipends or special purpose stipends to help with the cost of specific materials or equipment needed for school. Stipends from employers are commonly given to temporary interns or offered to employees to help with specified expenses, such as health care.

Stipends received from employers do not have to be for any minimum amount and may not be equal to receiving minimum wageMinimum WageMinimum wage is the lowest wage that companies are obliged to pay their employees for work performed over a certain period. It is the legal wage that when hours worked are calculated. Internship stipends enable an individual to gain valuable knowledge and experience from working in a field they are interested in pursuing as a career.

Taxes are not typically withheld from stipend payments; however, stipends do count toward taxable incomeTaxable IncomeTaxable income refers to any individual's or business’ compensation that is used to determine tax liability. The total income amount or gross income is used as the basis to calculate how much the individual or organization owes the government for the specific tax period. for the recipient.

Stipends for Various Purposes

Different individuals engaged in various types of endeavors receive stipends for a variety of purposes. However, the vast majority of stipends are given to support some kind of educational purpose, whether it be a stipend granted to a student to help them pursue higher learning or a stipend granted to an intern at a company receiving on the job training.

The following are the most common areas in which stipends are used:

1. Education

Stipends are very common in the area of higher education, although the individuals they are given to and the purposes of the stipends may vary widely. They are frequently given to faculty at universities to defray research costs.

Such stipends may be provided by the university where the faculty member is employed or by outside sources, such as government grants or stipends given by companies, foundations, or non-profit organizationsNPO (Non-Profit Organization)An NPO (non-profit organization) is an entity that is driven by a dedication to a social cause in the areas of religion, science, research, or educational that are interested in the research being conducted. Educational stipends are given to students from a variety of sources, such as fellowship grants, to help shoulder the cost of continuing their education.

2. Internships or Apprenticeships

Stipends that accompany internship or apprenticeship programs may be offered to either students or to employees of a company who are seeking to expand their job skills. Summer internships for students to work at a company in the career field they wish to pursue commonly offer a stipend of some sort.

For example, many investment banksList of Top Investment BanksList of the top 100 investment banks in the world sorted alphabetically. Top investment banks on the list are Goldman Sachs, Morgan Stanley, BAML, JP Morgan, Blackstone, Rothschild, Scotiabank, RBC, UBS, Wells Fargo, Deutsche Bank, Citi, Macquarie, HSBC, ICBC, Credit Suisse, Bank of America Merril Lynch offer summer internships with stipends to students, which serves two purposes – they enable the student to receive valuable on-the-job training, and they enable the company to evaluate the student for possible future employment offers.

3. Employee Benefits

Employers may offer stipends to help their employees defray certain expenses, such as health insurance or commuting costs. Employees may also be offered stipends to pursue additional education, such as a post-graduate degree, or to obtain professional certifications.

4.. Religious Stipends

Stipends may also be offered to clergy for specific purposes. For example, in the Catholic Church, it is customary for church members to offer a stipend to a priest for performing a Mass that is not part of the ordinary course of his duties.

In addition, stipends may be given by a church to volunteers doing charitable work – for example, students or other church members who agree to spend time doing disaster relief work in a designated area of a country.

Related Readings

CFI is the official provider of the Commercial Banking & Credit Analyst (CBCA)™Program Page - CBCAGet CFI's CBCA™ certification and become a Commercial Banking & Credit Analyst. Enroll and advance your career with our certification programs and courses. certification program, designed to transform anyone into a world-class financial analyst.

In order to help you become a world-class financial analyst and advance your career to your fullest potential, these additional resources will be very helpful:

• Earned IncomeEarned IncomeEarned Income is perceived as payment through an employer or one’s own business. It can include the following: wages, salaries, bonuses, tips
• De Minimis Tax RuleDe Minimis Tax RuleThe de minimis tax rule is a law that governs the treatment and accounting of small market discounts. Translated about minimal things, the de
• Education LoanEducation LoanAn education loan refers to a type of loan that is borrowed by students to finance their expenses related to post-secondary or higher
• Internship Cover LetterInternship Cover LetterAn internship cover letter is different from a typical cover letter since the student needs to work a lot harder to show why they should be hired. When applying for an internship, most companies require students to write and send an internship cover letter as part of the application documents.